Crystal Ball Predictions
While researching the information needed to build this calculator, one thing became clear -- no two Roth IRA calculators contain the same entry fields -- much less generate the same results.
The reasons for this phenomenon probably stem from the fact that they are all making crystal ball assumptions and predictions.
Can You See Into the Future?
To forecast the exact comparative consequences of converting your traditional IRA to a Roth IRA, you would need to be able to make precise predictions about the following details the calculators depend on for the calculations:
- Precisely when you will retire and how long you will live.
- Your specific state and federal tax bracket during each remaining year of your life.
- All changes to tax laws between now and when you die.
- How much you will need to withdraw from your retirement account each year of your retirement.
Well, since few of us even know for certain what tomorrow will bring, making predictions about the state of our health, wealth and tax laws years into the future is probably not a good investment of your time.
However, what is a good investment of your time, is taking the time to learn what an Individual Retirement Account (IRA) is, what a Roth IRA is, their advantages and disadvantages, and how they compare to other retirement investment options.
Saving for Retirement is Only Half the Equation
While contemplating contributing to an IRA or converting to a Roth IRA, be sure to keep in mind that investing and saving for retirement is only half the equation.
After all, if you have a mountain of debt on the day you retire, the proceeds from your retirement investment funds will have to go toward paying bills instead of paying for airfare to remote, tropical beaches.
Therefore your retirement might be better served by using extra money for paying off high interest debt (Invest in Your Debt Calculator).
Just the Honest Basics Please
While I'm by no means an expert in retirement investment options, I do have one important quality that should make what I have to say worth reading:
I'm not trying to sell you an IRA -- traditional, Roth or otherwise.